Crowell & Moring may have known about lawyer’s misdeeds months ago

A recent lawsuit suggests that Crowell & Moring may have known about its former employee Douglas Arntsen’s shady behavior as early as July.

Arntsen, a former Crowell & Moring associate, quit his job on Sept. 12 after nearly four years with the firm. Coincidentally, his departure coincided with one of the firm’s clients’ discovery that millions of dollars were missing from one of its escrow accounts maintained by the firm.

Arntsen admitted to taking some of the money and promised to return it, but instead he fled to Hong Kong, where authorities detained him on charges of grand larceny. Last week, the Wall Street Journal reported that Arntsen agreed not to fight extradition back to the U.S.

On Nov. 4, Oregon-based oil and gas company Xun Energy Inc. sued one of its intended investors, Lea Kennedy, for defaulting on a May contract to buy $10 million stake in the company. Xun’s CEO, Jerry Mikolajczyk, claims Arntsen was involved in a side deal with Kennedy involving escrow funds related to the deal. Kennedy had requested that Arntsen manage the $25,000 escrow account.

When the agreement with Kennedy fell through, Mikolajczyk sent a letter to Arntsen on July 22 asking for the funds to be returned. When Arntsen didn’t immediately return the money, Mikolajczyk emailed Arntsen five days later, blind-copying Crowell & Moring’s executive committee, and demanded the money be returned.

Arntsen returned it the next day, but the funds came from a different account than the one to which Mikolajczyk had initially wired the money. Mikolajczyk says neither Arntsen nor Crowell & Moring gave him any information about the accounts.